Dear friend, sit down for a moment. We need to have a conversation that might save you from some very unpleasant surprises down the road.
I know that knitting business started as therapy during lockdown. I know your photography Instagram was just for fun. And yes, I understand that teaching Spanish online began as helping a friend’s cousin. But here’s the thing, and I say this with all the love in my heart: the moment money started flowing into your PayPal, everything changed.
## The Moment Your Passion Becomes Their Business
Tax authorities around the world don’t care about your intentions. They care about transactions. And there’s a threshold—sometimes explicit, sometimes frustratingly vague—where your lovely hobby transforms into a taxable business activity.
In the United States, the IRS generally considers you’re running a business if you’re engaging in an activity with the intention of making a profit. In the UK, HMRC starts paying attention once you earn over £1,000 from self-employment. The EU varies wildly by country. But here’s what keeps me up at night for you nomads: **you might be triggering obligations in multiple jurisdictions simultaneously.**
That Etsy shop you run from Lisbon, Bali, and Mexico City in the same tax year? Each country has legitimate questions about where that income was generated, where you were resident, and who gets to tax what.
## The Insurance Gap Nobody Warned You About
Now, let me tell you about something that genuinely worries me.
Your personal travel insurance? It almost certainly has an exclusion clause for business activities. Pull out your policy right now—yes, right now—and search for terms like “business,” “professional,” “commercial,” or “work-related.”
Found it? That clause means if you’re injured while doing a paid photoshoot, your medical coverage might vanish like morning fog. If your laptop is stolen and it contains client work, your personal electronics coverage might not apply.
And professional liability? If a client claims your work caused them damages, that personal policy won’t protect you at all. You need specific coverage for:
– **Professional indemnity insurance** for service-based work
– **Product liability** if you’re selling physical goods
– **Public liability** if clients or third parties visit your workspace
– **Equipment coverage** that explicitly includes commercial use
## The Documentation Trail That Protects You
I’m going to ask you to do something that feels tedious but could save you thousands: **start documenting everything now.**
1. **Separate your finances immediately.** Open a business account. Even a simple one. Every business transaction should flow through it. This isn’t just organization—it’s evidence of professional intent and makes compliance infinitely easier.
2. **Keep every invoice, receipt, and contract.** Store them digitally, backed up in at least two locations. Tax authorities in most countries require you to maintain records for 5-7 years.
3. **Track your location with precision.** Use a calendar, an app, anything—but document where you were when you earned what. This becomes crucial for determining tax residency and permanent establishment risks.
4. **Create written agreements with every client.** Even friends. Especially friends. A simple contract protects both parties and demonstrates professional conduct.
## The Compliance Crossroads for Nomadic Creators
Here’s where I need you to pay very close attention.
Operating a business across borders isn’t just about where you pay taxes—it’s about understanding concepts like:
– **Tax residency:** Where are you legally considered to live for tax purposes?
– **Permanent establishment:** Have you accidentally created a taxable presence in a country?
– **VAT/GST obligations:** Are you required to charge and remit sales taxes in your customers’ countries?
– **Social security contributions:** Where should you be paying into retirement and health systems?
I won’t pretend these questions have simple answers. They often require professional advice tailored to your specific situation. What I can tell you is that ignorance is not a defense, and the penalties for non-compliance can be severe.
## My Protective Advice
I don’t want to paralyze you. I want to empower you to pursue your passion professionally and safely.
**First:** Accept that your hobby has evolved. This is a beautiful thing! It means your work has value. Treat it accordingly.
**Second:** Invest in a consultation with a tax professional who understands international freelancing. One hour of their time now could save you years of complications later.
**Third:** Review your insurance coverage today. Not tomorrow. Today. Upgrade or supplement as needed.
**Fourth:** Build compliance into your routine. Monthly bookkeeping, quarterly tax estimates, annual insurance reviews.
The path from hobbyist to professional is one of the most rewarding journeys you can take. I just want to make sure you arrive safely, without unexpected detours through audit offices or claims denials.
Now go check that insurance policy. I’ll wait right here.
With protective concern,
Ricardo